Tax on e-comm goods raises hackles

Shilpa Gupta, head- retail, FICCI, said that e-commerce provides a local manufacture access to a large segment of customers in all parts of the country and such taxes will kill the emerging e-commerce ecosystem.TNN | March 10, 2016, 12:52 IST

Flipkart has already challenged the Uttarakhand government's 10% entry tax on the goods brought by the e-commerce and in the absence of any clear regulations.

JAIPUR: Joining a growing number of states, Rajasthan has proposed to impose 5.5% entry tax on goods brought to the state by e-commerce companies which on couple of occasions have gone to courts protesting the tax measures.

Bihar, Uttarakhand and Assam have already levied entry tax on goods supplied by e-commerce players and states like Gujarat and Madhya Pradesh have also followed this in their Budgets passed recently.

Reacting to the Rajasthan government's Budget proposals, the e-commerce industry said while the entry tax will make products costlier for consumers, it will also reduce competitiveness of the small, local manufacturers who sell on marketplaces like Amazon, Flipkart or Snapdeal.

"CST is already paid on the goods brought into the state as per the orders of the customers. Asking to pay entry tax on it amounts to double taxation. The amendments in the entry tax cannot stand any court of law and it is unconstitutional," said a person associated with the e-commerce industry. The goods, which are being brought in the states are not for onward sale but for consumption and use of individual consumers, who are not 'dealers, he added.

Shilpa Gupta, head- retail, FICCI, said that e-commerce provides a local manufacture access to a large segment of customers in all parts of the country and such taxes will kill the emerging e-commerce ecosystem.

"Like green and IT revolutions, e-commerce has emerged a new frontier that promises opportunities for growth to a large section of the entrepreneurs who could not grow beyond their localities due to lack of financial resources. Instead of welcoming it and supporting it, we are killing the industry," added Gupta.

Supporting its decision, a senior official of Rajasthan government said that many states have made amendments to their existing entry tax legislations to impose the levy on goods which have been transacted through electronic commerce portals. This will empower commercial tax departments to collect the tax from every person who delivers or supplies goods to any buyer in the state.

Flipkart has already challenged the Uttarakhand government's 10% entry tax on the goods brought by the e-commerce and in the absence of any clear regulations, more and more states are imposing the tax. But industry watchers said that the Centre has not shown seriousness because when the Goods and Services Tax gets introduced, it will subsume all taxes.

"The government is serious on rolling out GST. If the government rolls out the new tax regime quickly, then most of these taxes will be irrelevant. But if GST is delayed, it will not only have a huge impact on the industry but also generate lot of litigations," added another source.